January 1997 INSIGHT Feature:

State of the Industry:

The Collision Repair Industry Prospered in 1996. Are You Prepared to Grow Your Business in 1997?

The year just ended was kind to many collision repair shops across the U.S. and Canada. Business levels increased dramatically for many facilities- especially those that focused on sales and marketing at the expense of their competitors. Business levels overall showed a fair increase in 1996. (Editor’s Note: See the chart on page 13 of this issue.)

In the first quarter of 1996, collision repair claims increased over 11 percent versus the first quarter of 1995. In large part, this increase was due to a number of winter storms that heightened collision losses when compared to 1995’s more mild winter. Growth in the second quarter of 1996 settled down to a rate of 4.4 percent over the previous year. Though statistics were not available at press time, a slight increase in third quarter claims- in the one percent range is likely. The overall growth rate for combined first and second part claims should average out to approximately 6 percent for the year if predictions for the second half hold true to indications given by INSIGHT’s Market Watch data.

In preparation for the coming year, INSIGHT presents our traditional Game Plan for the coming year, highlighting important trends and action items for shops to consider during the next 12 months.

1997 Game Plan

Prepare a Game Plan for Growth- Consolidation’s effect is being felt in the collision repair industry. Long predicted, signs of a decline in the number of collision repair facilities are beginning to show in data collected by INSIGHT over the past two years. (Editor’s Note: See chart at right.) Traditionally, shop populations have increased during times of increased business. This was not the case in 1996. Professionally managed facilities are achieving growth rates above the rate of increase in the overall collision repair market by attracting work that would have gone to their competitors. Prepare a plan focusing on both the sales and marketing requirements to secure work from competitors and also the requirements of the production facility to meet turn-around goals and maintenance of customer satisfaction.

The following list includes key issues that should be considered in the creation of the 1997 Game Plan:

Front Office

CSI Tracking- Customer satisfaction is of primary importance. If you do not currently track customer satisfaction, this is a primary item to begin in the new year.
Financial Analysis and Benchmarking- Understanding a shop’s operating and financial performance is a key factor in preparing the growth game plan. "Where are we now?" and "What is achievable?" are the two key questions answered through financial analysis and benchmarking exercises.
Electronic Data Interchange (EDI)- Being able to prepare a computerized estimate is only one portion of the computerization taking place in collision repair shops across the US. EDI is becoming a large part of many collision repair facilities business. This trend will increase dramatically through 1997 as insurers take advantage of new product offering from ADP, CCC, and Mitchell that allow improved claims assignment, estimate, repair order and electronic funds transfer transactions between shop and insurer.
Build Non-Traditional Referral Base- The importance of referrals from insurers, as a part of a DRP relationship, or direct from agents and claims staff is of obvious importance. Many repair facilities still miss the boat on non-traditional business sources of referrals. The can include towing companies, tire and wheel alignment shops, mechanical repair facilities and OE dealer relationships. Look towards your facility’s supplier base first for potential referral sources.

Production Floor

Production Management- Implementation of sound production management techniques is a key component to achieve maximum productivity from a collision repair facility. Production management can help eliminate bottlenecks through improved vehicle scheduling, part tracking and other techniques.
Analyze Employee Training Base- Increased pressure to control the rise of collision repair claims cost will place higher importance on technician and management productivity. To determine training needs INSIGHT suggests that repairs first analyze productivity statistics by employee. Low performing technicians are primary candidates for increased training.
Also, I-CAR Gold Class status is increasingly being used as the baseline for participation in many insurance company referral programs. I-CAR recently redefined the criteria for participation in the Gold Class program. Many shops will need to update technician training schedules to maintain Gold Class status for the coming year.

Reprinted from the January 1997 Issue of Collision Repair Industry INSIGHT.

Return to Archives